Rethinking IT Services for SaaS ERP and CRM, Part 1: Saying goodbye to old models

Let's start with a bold statement: Cloud-based enterprise software and its subscription-based economic model will force IT services firms to change their business models.

The rapid growth of the Software as a Service (SaaS) cloud delivery model has exposed a painful reality: consulting firms, VARs and system integrators have been dodging any form of real accountability for business outcomes, empowered by their business model which depends on monetizing the time and effort of experts. Shielded by the almighty billable hour and its close cousin the "change request", consultants simply haven't had to worry much about delivering business outcomes. With teams of well-paid software experts and a business model driven by utilization, most firms focus on charging out hours, executing projects (large buckets of billable hours), and converting time or effort into value.

The problem is that time and effort simply don't equate to customer value. The accepted consulting services business model is lacking in service-level commitments, incentives to perform, or accountability for outcomes. Clients usually aren't looking to buy units of time, and when they need access to specialized expert resources, paying by the hour can be a strong disincentive to make a call.

We have always been bullish about enterprise software in the cloud and we've spilled a lot of digital ink sharing the reasons why. Now that the major ERP and CRM vendors have thoroughly embraced it and customers are starting to adopt cloud solutions in droves, it is becoming clear that consulting firms will need to adapt their business models. IT Services guru Thomas Lah explains that with SaaS "the features and function ...